Investor sentiment has been impacted by concerns about a potential government shutdown, a slowing labor market, and high stock valuations. In light of this uncertainty, many investors are turning to dividend stocks as a source of stable returns. Prominent analysts on Wall Street have recommended several dividend-paying companies that possess strong fundamentals, making them suitable additions to investment portfolios. Here are three noteworthy options highlighted by analysts tracked by TipRanks, a platform that ranks analysts based on their historical performance.
Brookfield Infrastructure Partners: A Solid Choice
First on the list is Brookfield Infrastructure Partners (BIP), a global infrastructure company managing diversified, long-life assets across utilities, transport, midstream, and data sectors. On September 29, 2023, BIP declared a quarterly dividend of 43 cents per unit, marking a 6% increase year-over-year. This brings the annualized dividend to $1.72 per unit, providing a dividend yield of 5.2%.
Following a recent Investor Day event, Devin Dodge, an analyst at BMO Capital, reaffirmed a buy rating for Brookfield Infrastructure with a price target of $42. He noted that management presentations indicated strong organic growth trends across BIP’s portfolio, which he anticipates will become more evident in the upcoming quarters. Dodge emphasized the increasing number of high-growth platforms within BIP’s portfolio and the significant investment potential across its sectors, particularly in digital infrastructure.
Dodge pointed out that capital spending by hyperscalers is projected to rise by 50% this year, suggesting substantial growth opportunities for BIP’s data center platforms. He mentioned that BIP’s funds from operations per unit (FFO/unit) growth is approaching an inflection point, having recorded a compound annual growth rate of about 10% over the past five years despite challenges from foreign exchange fluctuations and high interest rates.
“As FFO/unit growth shifts higher, we believe there are positive implications for distribution growth and valuation,” stated Dodge. Nevertheless, TipRanks’ AI Analyst holds a “neutral” rating on BIP with a price target of $33. Dodge ranks No. 377 out of over 10,000 analysts on TipRanks, with a success rate of 73% and an average return of 13.2%.
Ares Capital: A Leader in Specialty Finance
The second recommendation is Ares Capital (ARCC), a specialty finance company that extends direct loans and other financial products to private middle-market firms. Ares Capital pays a quarterly dividend of 48 cents per share, translating to an annualized dividend of $1.92 per share and a robust yield of 9.4%.
In a recent update regarding business development companies, Kenneth Lee, an analyst at RBC Capital, reiterated a buy rating on Ares Capital, setting a price target of $24. TipRanks’ AI Analyst has an “outperform” rating on ARCC with a slightly higher price target of $25. Lee favors ARCC, along with Blackstone Secured Lending Fund and Sixth Street Specialty Lending, citing ARCC’s proven ability to navigate risks through different market cycles.
Lee highlighted Ares Capital’s competitive edge, which stems from its access to the Ares global credit platform. He expressed confidence in the company’s potential to achieve above-average returns on equity. Additionally, Lee pointed out that Ares Capital’s dividends are well-supported by core earnings per share and prospective net realized gains. Lee ranks No. 59 among over 10,000 analysts tracked by TipRanks, achieving a success rate of 72% and an average return of 16.7%.
ONE Gas: A Regulated Utility Option
Lastly, ONE Gas (OGS) is a regulated natural gas utility that serves more than 2.3 million customers in Kansas, Oklahoma, and Texas. The company recently announced a quarterly dividend of 67 cents per share, amounting to an annualized dividend of $2.68 per share and a dividend yield of 3.3%.
Following a revision in his outlook, Gabe Moreen, an analyst at Mizuho, upgraded OGS from hold to buy and raised his price forecast to $86 from $77. Moreen cited the potential benefits from Texas legislation (HB 4384), which allows for cost recovery associated with utility infrastructure. He anticipates this legislation could provide a full-year benefit of approximately 18 cents in incremental EPS in fiscal 2026.
Moreen believes that this benefit is not a one-off occurrence, but will grow alongside ONE Gas’s yearly capital spending in Texas, which constitutes about 32% of the company’s rate base. He stated, “We believe this will place a floor under OGS’ growth outlook at the higher end of its 4-6%,” while also noting that easing interest rates could benefit the company by reducing expenses.
He ranks No. 142 among more than 10,000 analysts on TipRanks, with a success rate of 75% and an average return of 13.3%.
As market conditions evolve, these dividend stocks represent opportunities for investors seeking stability amidst uncertainty.
